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en-usTechdirt. Stories filed under "interoperability"https://ii.techdirt.com/s/t/i/td-88x31.gifhttps://www.techdirt.com/Fri, 17 Oct 2014 03:50:26 PDTAntitrust, DRM & Coffee: Is It Illegal For Keurig To Lock Down Its Brewers?Glenn Manishinhttps://www.techdirt.com/articles/20141016/16321228850/antitrust-drm-coffee-is-it-illegal-keurig-to-lock-down-its-brewers.shtml
https://www.techdirt.com/articles/20141016/16321228850/antitrust-drm-coffee-is-it-illegal-keurig-to-lock-down-its-brewers.shtml
Even before the landmark United States v. Microsoft Corp. antitrust case, competition law was a bit schizophrenic when it came to the question of interoperability. Monopolists have no general duty to make their products work with those of competitors, but what about the situation where a dominant firm deliberately re-designs products to render them incompatible with others? That is the provocative question raised by several pending antitrust lawsuits filed against Green Mountain Coffee, manufacturer of the Keurig line of single-serve coffee makers and coffee "pod" products.

TreeHouse Foods alleged in a complaint last winter that after its patent on "K-Cups" expired in 2012, Green Mountain:

abused its dominance in the brewer market by coercing business partners at every level of the K-Cup distribution system to enter into anticompetitive agreements intended to unlawfully maintain Green Mountain's monopoly over the markets in which K-Cups are sold. Even in the face of these exclusionary agreements that have unreasonably restrained competition, some companies, such as TreeHouse, have fought hard to win market share away from Green Mountain on the merits by offering innovative, quality products at substantially lower prices. In response, Green Mountain has announced a new anticompetitive plan to maintain its monopoly by redesigning its brewers to lock out competitors' products. Such lock-out technology cannot be justified based on any purported consumer benefit, and Green Mountain itself has admitted that the lock-out technology is not essential for the new brewers' function.

In the consolidated multi-district litigation that ensued, Green Mountain is specifically charged with designing a so-called "Keurig 2.0″ brewer which features technology that allows it to detect whether a coffee cartridge is one of Keurig's K-Cups or is made by a third party that does not have a licensing agreement with the company. The machine will not brew unlicensed coffee pods.

The federal court overseeing the MDL cases denied the plaintiffs' motion for an injunction on procedural grounds in September, issuing an opinion which reasoned that commercial success of the "2.0" brewers was uncertain and that coffee competitors would still have open access to some 26 million Keurig "1.0" machines for several years. In other words, the court did not reach the merits of the monopolization claim against Green Mountain.

So where does that leave Keurig? As Ali Sternburg observed before revelations of its new 2.0 technology, Green Mountain's prior 20 years of patent protection allowed the company to build a competitive advantage by "cultivating its brand (which likely involves trademark protection), honing its supply chain efficiencies, and generally maintaining its dominance due to having the first-mover advantage." More than ten years before those patents first issued, moreover, the federal courts had ruled that new product introductions by monopoly firms — in one well-known instance, Kodak — would not be considered an antitrust violation because "a firm that pioneers new technology will often introduce the first of a new product type along with related, ancillary products that can only be utilized effectively with the newly developed technology."

So-called technological ties exist all over the tech world, from smartphone apps that work only with a single website, to PC printers that only accept chip-enabled ink cartridges from the printer manufacturer, to proprietary media DRM protocols such as Apple's AAC format for music, to Sony's failed attempts at proprietary flash-memory stick technology. Yet there's a profound difference between designing a new photographic system like the then-revolutionary Instamatic II in 1978 (subject of the Foremost Pro Color decision quoted above) and re-designing an existing product line to disable competitive substitutes.

The Verge called Green Mountain's tactics "locking down its coffee makers to keep out cheap refills." And despite world-class defense counsel, little that Keurig has said so far connotes serious efficiency or product quality advantages to its pseudo-DRM approach to coffee pods. If those are the facts, the courts will be forced to face the competitive merits of the MDL plaintiffs' claims in circumstances in which innovation, the keystone of the doctrine permitting technological tying, is notably absent. Conversely, the first antitrust competitor, TreeHouse, announced in August that it had successfully reverse-engineered the Keurig 2.0 system so that its coffee pod products "will work in both existing and next generation coffee makers manufactured by the leading supplier of personal at-home brewing systems in the United States."

Which is it, innovation or predation? Certainly it is impossible to judge from afar or to make generalizations. Under the burden-shifting legal approach to monopolization claims laid out by the Microsoft courts, proof of exclusionary effects require a Section 2 defendant to come forward with a procompetitve rationale for the challenged practices. Keurig claims its pod-detection interactive technology allows 2.0 coffee makers to determine which type of package (including Vue-packs, an earlier Green Mountain technology for larger brew sizes and more intense flavors that never achieved commercial success) has been inserted and offer up the appropriate user interface. "Keurig 2.0's interactive technology is Keurig's platform for future innovation," write the company's antitrust lawyers.

As the law stands today in the U.S., antitrust courts recognize that whether any particular act of a monopolist is exclusionary, rather than a form of vigorous competition, can be difficult to discern: "the means of illicit exclusion, like the means of legitimate competition, are myriad." Faced with conflicting evidence and a non-pretextual claim of efficiencies, the MDL court will therefore be required to balance good versus bad — that is, determine whether "the anticompetitive harm of the conduct outweighs the procompetitive benefit." That's a tall challenge in the case of Keurig.

Yet it is also one at the cutting-edge of competition law that presents serious ramifications for disruptive innovation. Could Uber be required as an antitrust matter to open its system to Hailo drivers? Is Twitter liable to TwitPic for integrating its own photo-posting function into the 140-character tweet service, thus effectively putting some third-party companies out of business? Are Microsoft, or Google, or Apple required to open their APIs to competitors or, once opened, legally prevented from reverting to a closed ecosystem? Those are competition questions that cannot, and should not, be answered based on either a 30-year old case involving Instamatic cameras and film or a 15-year old case involving Windows '95 and Internet Explorer 1.0.

In another context, American courts have long held that First Amendment protection for the free exercise of religion means the judiciary cannot assess whether a belief system that claims to be a religion really is one, because courts lack the basic competence to make such judgments reliably. One could often say the same thing about competition analysis, since differentiating innovation from exclusion is fraught with dangers. One court of appeals has held, as a consequence, that

[t]here is no room in [antitrust law] for balancing the benefits or worth of a product improvement against its anticompetitive effects… There are no criteria that courts can use to calculate the ‘right' amount of innovation, which would maximize social gains and minimize competitive injury. A seemingly minor technological improvement today can lead to much greater advances in the future.

Indeed, the leading U.S. antitrust treatise concludes that "[b]ecause courts and juries are generally incapable of addressing the technical merits or anticompetitive effects of innovation, they quickly make the relevant question turn on intent. We believe this is the worst way of handling claims that innovation violates the antitrust laws."

Yet a black-letter rule of "per se lawfulness" that necessarily prohibited competitors from challenging product re-designs based on facial claims of technological innovation would, in this author's judgment, go too far in the other direction. Hopefully, the Keurig 2.0 antitrust lawsuits will not end as a re-affirmation of the old legal adage that hard cases make bad law.

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]]>the-k-cup-dilemmahttps://www.techdirt.com/comment_rss.php?sid=20141016/16321228850Thu, 23 Jul 2009 02:19:20 PDTApple Withdraws Lawsuit Against Wiki Site Owner Over iPhone/iPod Interoperability Hack DiscussionMike Masnickhttps://www.techdirt.com/articles/20090722/2331435626.shtml
https://www.techdirt.com/articles/20090722/2331435626.shtmltook Apple to task for threatening the owner of a wiki site. Apple claimed that an ongoing discussion on the site about how to build interoperability between iPods and iPhones and alternative software other than iTunes violated the DMCA -- which requires quite a novel interpretation of the DMCA. After Apple refused to back down, EFF sued in April. Somewhere along the way, it looks like Apple's lawyers started to realize that it had pretty close to no chance whatsoever and has now withdrawn this particular threat. The EFF is dropping the lawsuit, but isn't pleased that the whole thing had to happen in the first place:

"While we are glad that Apple retracted its baseless legal threats, we are disappointed that it only came after 7 months of censorship and a lawsuit," said EFF Senior Staff Attorney Fred von Lohmann. "Because Apple continues to use technical measures to lock iPod Touch and iPhone owners into -- and Palm Pre owners out of -- using Apple's iTunes software, I wouldn't be surprised if there are more discussions among frustrated customers about reverse engineering Apple products. We hope Apple has learned its lesson here and will give those online discussions a wide berth in the future."

Indeed. While the Palm Pre situation is in the other direction (interop between alternative hardware and iTunes software, rather than alternative software with Apple hardware), it shows again that Apple will do whatever possible to stop people from making legal use of products they purchased.

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]]>took &apos;em long enoughhttps://www.techdirt.com/comment_rss.php?sid=20090722/2331435626Thu, 19 Feb 2009 02:14:57 PSTBand Puts All Its Music (Plus More) Into A $3 iPhone AppMike Masnickhttps://www.techdirt.com/articles/20090219/0123543828.shtml
https://www.techdirt.com/articles/20090219/0123543828.shtmlThe Presidents of the United States of America have released a special iPhone app that contains all of the music from all of their albums, as well as additional rare and unreleased music and images. The whole thing costs $3 -- which certainly blows the old $1/song model out of the water. It's worth noting that one of the band members is now VP of the software company that made the app... and the band actually owns all the rights to its own music -- so that made all of this much easier. Also, it's a bit unclear how the app works exactly, but it certainly looks like the music is locked (hello, DRM!) inside the app. That's annoying.

There have been a few other bands that have experimented with similar "album in an app" type models before, and it's certainly an experiment worth watching. However, by itself, I'm not sure how scalable the model really is. If other bands do this using different apps, then you have to run each one separately and you lose out on the benefit of a central control system for all your music. And, if it really does involve DRM, then bands may just jump on this and alienate fans yet again. Still, if a "standard" and open way of doing this was established, such that bands could have their own apps easily interoperate, and the music wasn't locked down, you could see some interesting models emerge. For example, imagine getting an app that actually kept you updated on a band? Every time they release a new song or add new artwork, it automatically is added to your collection across different devices. That would be a useful application. Unfortunately, this particular app only seems to be a tiny step in that direction (and due to DRM, perhaps a step in the wrong direction).

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]]>more-experimentshttps://www.techdirt.com/comment_rss.php?sid=20090219/0123543828Fri, 21 Dec 2007 18:04:00 PSTMemo To Macrovision: Interoperable DRM Is An OxymoronTimothy Leehttps://www.techdirt.com/articles/20071220/105118.shtml
https://www.techdirt.com/articles/20071220/105118.shtmla bit of a head-scratcher. He sings the praises of Apple's iPod ecosystem, but then complains that Apple's DRM prevents content from being played on non-Apple devices. Consumer electronics manufacturers and content creators, he says, need to "work together to create standards" for digital media. That's music to my ears. Except that I suspect that Bullwinkle isn't actually talking about open standards. Macrovision, after all, is a DRM vendor. If companies wanted to distribute their music or movies in open formats like MPEG, they wouldn't need Macrovision's help to do it -- they could just ditch DRM altogether (which, clearly, Macrovision doesn't want). What Macrovision appears to be pushing for Apple and other vendors to switch to its own "open" DRM format. But in fact, there's no such thing. DRM is a walled garden by definition. Some walled gardens are easier to get into than others. The DVD format, for example, has been licensed to a bunch of different vendors. But that doesn't change the fact that there's still a DVD cartel that shuts down innovative devices they don't like. An even more egregious example is Microsoft's "interoperable" PlaysForSure format. Microsoft touted it as an "open" alternative to FairPlay until last year, when—surprise!—they decided not to allow people to play PlaysForSure media files on the Zune. Ultimately, Macrovision isn't interested in getting rid of walled gardens. It's just upset when it's not the gardener.